The transition to distributed generation calls for a new regulatory model.
With the best of intentions, policymakers have encouraged the proliferation of distributed generation (DG) in various forms. Now, however, the trend toward DG is accelerating more rapidly than traditional utility ratemaking and business models are capable of managing. Failure to rationalize the regulatory framework will bring serious and costly disruption.
Technology is changing the game. Is your utility ready?
Although today microgrids serve a tiny fraction of the market, that share will grow as costs fall. Utilities can benefit if they plan ahead.
The authors respond to Roycroft’s reality check.
Lisa Wood and Ahmad Faruqui
Experience with time-of-use pricing programs shows that a large majority of low-income customers will benefit from dynamic prices. In fact, not making such prices available to these customers might be harmful. In the most efficient system, all customers will face the same prices—and policy makers can provide direct relief to ease the burden for low-income customers.
Evaluating the impact of dynamic pricing.
Are residential time-of-use prices only effective for middle class households, or do low-income customers benefit too—as authors Lisa Wood and Ahmad Faruqui asserted in their October 2010 article? Data from pilot programs show that low-income customers exhibit a reduced ability to benefit from dynamic pricing. Demand response programs should accommodate the realities of low-income customers’ consumption patterns.
Correcting misconceptions about load-management programs.
Lisa Wood and Ahmad Faruqui
Do low-income customers respond to dynamic rates? The answer is yes, and in fact such customers can benefit from dynamic pricing without shifting loads”contrary to conventional wisdom. A study co-authored by the Edison Foundation’s Institute for Electric Efficiency and the Brattle Group shows that restricting access to dynamic rates might actually be harmful to most low-income customers.
The changing architecture of demand response in America.
Ahmad Faruqui, Ryan Hledik and Sanem Sergici
Pilot projects are demonstrating the potential of smart metering and smart rates to make the most of supply and demand resources. But as empirical studies show, not all pricing designs are equally suited to every region.
Engaging customers will require more than TOU pricing.
Imagine a setback thermostat programmed at the factory that the consumer couldn’t modify. Who would want this device? You could give the customer a big enough discount to get her to accept the device, but she would be happier and you could save about as much energy if the customer could decide on the temperature and time settings.
Achieving the smart grid’s potential requires a revolution in electricity pricing.
Achieving the smart grid’s potential requires a revolution in electricity pricing. Smart metering and smart rates might yield surprising and beneficial changes in the U.S. utility industry. But capturing those benefits will require an intelligent and careful approach to implementing dynamic pricing.
A step-by-step approach to intelligent rate design.
Ahmad Faruqui and Ryan Hledik
The advent of the smart grid is sparking interest in intelligent rate design. But while state and federal goals encourage more efficient rate structures, regulatory and political considerations complicate the process. Getting to a next-generation rate design will require a phased transition.
Why a risk-hedging product for small customers isn’t the gamble you may think.
Michael O’Sheasy and Mike Becker
Most believe flat electric bills pose tremendous risk, but the reality is that an exciting pricing opportunity exists. The energy supplier can manage uncertainty by gradually building program participation as it learns to balance risk and returns, or through a risk adder. The experience of Internet and telecom service providers suggests that safe, profitable flat fees can be constructed, and that customers will buy them.